Starting to trade on the foreign exchange (forex) market can seem overwhelming at first.
As well as having an understanding of how forex trading works, you’ll also have to expand your knowledge of different strategies, which will help you make the most accurate trades.
Whilst this can seem complex, it’s certainly one of the most crucial aspects of forex trading.
You should take the time to fully comprehend the variety of strategies, to ensure your trades have the highest potential for profit as well as minimal risk.
Each trading strategy includes a unique process, and it’s the understanding of how each of these strategies works which produces a successful trading journey for beginners.
With this in mind, this article will take you through the main trading strategies used by the millions of forex traders worldwide, to help you get your forex trading journey off to a successful start.
One of the most widely used forex trading strategies is day trading. This is when all of your trades are conducted within the space of a single day.
You can open as many positions as you like on the market, but each one must be closed before the end of the day, with none left open overnight.
The aim of this strategy is to profit from the daily movements and fluctuations of asset values on the market.
Being that it’s such a highly-volatile market, there can be a vast amount of movement on forex within the space of 24 hours, which is more than enough for day traders to make sufficient profits.
Also, by executing day trades you can constantly monitor your positions, without having to leave them overnight wherein they could drastically change without your knowledge.
Another highly-beneficial trading strategy for forex beginners is scalping trading. This style of trading involves frequently opening trading positions, but only for very short periods of time.
This can include opening multiple positions for a matter of minutes, before closing them and opening more.
The goal of this strategy is to gain multiple incremental profits from your trades, so that the small rewards can slowly amount to a much more significant profit, by the end of the day or week.
Another benefit of scalping trading is that it allows multiple trades to be executed with as little risk as possible. Since the trades are only open for a few minutes at a time, there is less opportunity for great amounts of losses to incur before the position closes.
Swing trading is also great for beginners, and it involves spotting trends or patterns in the market, and taking advantage of any price swings.
The forex market is full of drastic price swings which occur frequently, and swing traders aim to profit from these swings, as opposed to slower, more steady price movements.
The most effective way to achieve this is to find an appropriate moment in a predicted price swing to open your position, and then close it at the perfect moment when you’ve made a sufficient profit, and before the price value reverses back.
Swing trading is heavily reliant on thorough market analysis, so ensure you use tools such as technical indicators to gain the most accurate predictions of where price swings will occur.
Beginner traders should also consider using position trading when opening positions on the forex market.
This strategy involves opening fewer positions at a time, and keeping them open over prolonged periods. Many position traders can open as a few as one or two positions, and keep them open over the course of months or even years.
Amidst the rapid price fluctuations on forex, there are also many instances where an asset value can show a certain predicted movement over a long period of time.
As a result, traders can opt to make a long-term profit from these movements, and reap the benefits when it’s time to close.
A great tip for beginners is to have confidence in your position and the market analysis. Simply because your asset’s value has intermittent dips, doesn’t mean it’s necessarily time to close, and the overall direction could still be moving in your favour.
Now that you have these top trading strategies in your arsenal, you can begin your forex trading journey on a more prepared and informed basis, and start seeing increases in your profit potential.